Sierra Leone Fiscal Guide 2020

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Introduction: Sierra Leone Fiscal Guide
2020
Income Tax
Basis of taxation

Residents are taxable on worldwide income, subject to certain exemptions for foreign income. Non -residents are taxable
on any payments subject to withholding tax, and all Sierra Leone income. Temporary residents are taxable on Sierra Leone
income and any foreign income remitted to Sierra Leone.

Rates

R esident Companies

Co rporation tax (CIT):

- Basic rate 25%

Capital gains 30%

Rental income 10%**

Dividends 0%¹

Interest 15%²

Royalties 25%

Natural resource payments 25%

Payments to contractors 5%

National Insurance Levy 0.5% FA 2017

Non-Resident Companies
Co rporation tax( CIT):

- Basic rate 25%

Capital gains 30%

Rental income 25%***

Dividends 10%***

Interest 15%***

Royalties 25%***

Natural resource payments 25%

Payments to contractors 10%

National Insurance Levy 0.5% FA 2017

Management/Technical Service fees 20%

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Basis of Taxation: Rates
R esident individuals

Income tax 0-30%

Rental income 10%**

Dividends 10%*#

Interest 15%*

Royalties 25%

Natural resource payments 25%*

Payments to contractors 5%*

Payment to Professional Service Providers 10%* (Finance Act 2020)

National Health Insurance Levy 0.5% (Finance Act 2017)

* Tax is withheld at source.

** Subject to an allowance of 10% for repairs & maintenance and a tax free threshold of Le. 7,200,000.
¹ Dividends received by a resident company from another resident company are exempt from tax.
² Interest on government development stocks is exempt from tax.
*** Final tax for non-resident companies

Non-Resident individuals

Corporation tax as for residents but only on Sierra Leone-source income:

Income tax 25%
Rental income 25%*
Dividends 10%*
Interest 15%*
Royalties 25%*
Natural resource payments 25%*
Payments to contractors 10%*
Payment to Professional Service Providers 10%* (Finance Act 2020)

National Insurance Levy 0.5% (Finance Act 2017)

Trust income 25%*

*Tax is withheld at source.

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Residents
An individual is a resident individual for a year of assessment, if
t h at individual:
❑ Has their normal plac e of abode in Sierra Leone and is
present in Sierra L eone at any tim e during th e year of
assessment;
❑ Is present in Sierra L eone for mor e than 182 days in a 12-
month period that commences or ends durin g the year of
assessment; and
❑ Is an official of th e gov ernment of Sierra L eone post ed
overseas during the year of assessment.
Tem porary residents
An indiv idual that is resid ent (as per the t ests abov e) shall be
treated as a t emporary r esident for the entir e tax year if that
individual:
a) Is not a citizen or domiciled in Sierra Leone;
b) Does not intend to reside in Sierra L eone for more than
four years; and
c) At the end o f th e year, has not been resident in Sierra
Leone for more than four years.
Individuals not domic iled in Sierra Leon e are deem ed to be
temporary residents if they are in the country for period
exceeding 182 days in a tax year.
Individuals who r eceiv e on ly employm ent income, or are
subject to the nil rate of tax, are not r equired to file a tax
return. The tax year runs to 31 Dec ember. How ever,
companies may choose any financial year end they wish, by
applying for a substituted financial year.
Every taxpayer is r equir ed to file a tax return four months after
year-end or can r equest for an extension o f L e 5,000,000 to file
a tax r eturn late. Th e r eturns must b e filed w ith a set of audited
financial statem ents, audited by a firm of accountants
recognised by the Commission er General o f National Rev enue
Authority, as w ell as other documents or supporting
documents required to support the tax return.
R esident individuals
Tax is applied on payments or b enefits ar ising from past,
present or prospectiv e world-w ide employm ent including the
following:
❑ Wages, salaries, commissions and bonuses;
❑ Gift s r eceived by an emp loyee in the course of
employment;
❑ Allowances provid ed by the emp loyer for th e ben efit of
the employee; and
❑ Fringe ben efits paid by the employ er for th e ben efits of
employees or their family members.
Employment income is d eem ed to arise in Sierra Leon e if the
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work giv ing r ise to the income is carried on in Sierra Leone
irresp ective of wher e the contract of employm ent is signed or
payments made.
Fringe ben efits are taxed on the basis o f the lower of market
value and scaled valu es as provid ed under the Tax Act. The
rates of tax applicable on employment income ran ge from 0-
30%, on a monthly basis as follows:
Chargeable Incom e Tax Rate
Under Le 600,000 Nil
Next Le 600,000 15%
Next Le 600,000 20%
Next Le 600,000 25%
Above Le 2,400,000 30%
There is a tax free threshold of L e500, 000 per month for
allowances.
Furthermore, an annual lump sum tax (known as payro ll tax) is
lev ied on all foreign nationals work ing in Sierr a Leone. The
payroll t ax is pay able by th e employ ers o f the for eign nationals.
The amount payable by emp loyer s per expatriate employ ee as
follows:
C it izens from ECOWAS – L e 1,500, 000
No n -ECOWAS Citizens – L e 5,000,000
Sierra Leon e has a contributory Social Security schem e. The
total minimum contribution by both the employee and
employer is 15% of basic salary. Th e employ ee and employer
contribute 5% and 10% o f the emp loyee’s basic salary
respectiv ely. The amount is r emitted to the National Social
Security and Insurance Trust (NASSI T). The amount
contributed by the employee is granted as a deduction against
his personal income tax.
L eave allowance
For indiv idual Income t ax, only leav e allowance in excess of the
gross monthly salary is subject to income tax at the existing
highest mar ginal tax rate (30% - effective January 2019), any
amount below the gross monthly salary is tax exempt.
An indiv idual is non-r esident in Sierra Leon e if he or sh e do es
not fulfil the definition of a “resident individual.”
Non-resident individuals are subject to tax on employm ent
income der ived in Sierra L eone. The employm ent incom e of a
non-resid ent individual is det ermined in the sam e mann er as
that of a resid ent indiv idual. Emp loyment income of a non-
resid ent is subject to tax at a flat rate of 25%. The tax is
imposed on the employ er as a withholding tax (WH T), pay as
you earn (PAYE).
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Non-resident individuals
Pensions and annuit ies pay able to non-r esidents are also subject
to withholding tax at 25%. A non-resident indiv idual is not
required to submit a tax r eturn wher e the non-resid ent’s only
income was employm ent income subject to withholding tax. In
such cases the WHT is therefore a final tax.
Cap ital gains tax
CGT is pay able on gain accruing to or der ived by a p erson or
company from the disposal of chargeable assets. The CGT rate is
30% of capital gains.
Capital gain is defined as the exc ess o f the consider ation rec eiv ed
or rec eivab le by a chargeable p erson from th e r ealization or
disposal o f a chargeable asset over the cost base at th e t ime of
disposal or r ealization. Ther e is howev er a CGT exemption of Le
3,600,000 per annum or transaction on chargeable gain realized.
Tr ansfer pricing and thin capitalisation
Sierra L eone do es not have tran sfer pricing ru les. However, the
Commissioner of Income Tax can re-characterise a transaction or
an elem ent o f a transaction or disr egard a transaction wh ich in his
opinion was entered into as part o f a tax avo idance schem e which
would result or has resulted in less tax being paid.
There ar e no specific thin c apitalization rules in Sierr a L eone.
However, there are restrictions on shareholder loans as follows:
(i) The amount allowable in r espect of inter est
expense is restricted on lo ans from a
sharehold er or his associate to the extent o f
interest on one half (50%) the excess of that
loan over the shar eholder’s paid up shar e
capital;
(i) In the case of m ining companies, the amount
allowab le in r esp ect of inter est expense is
restricted on loans from a shar ehold er or his
associate on total borrowing o f th e pay ing
company to three times its p aid-up share capital.
Interest on the excess of the loan in this regard
is disallowed as a d eduction against taxable
profit.
Any amount disallowed shall be treated as a deemed dividend.
Ot h er taxes
A m ining royalty is levied ad valorem on the ex -mine pr ice of
minerals as:
❑ 5% precious stones;
❑ 4% precious metals; and
❑ 3% all other min erals except building and industrial
minerals.
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I n heritances and donations
No estate duty is levied in Sierr a Leon e nor is a donation or gift tax
applied.
Tr ansaction taxes
Go ods and services tax (GST)
Goods and servic es tax (GST) is lev ied on all goods and serv ices
supplied in Sierra L eone except exempt supplies. Goods and
services imported into Sierra Leone are also subject to GST.
Su pply of goods
A supply of goods includes:
❑ Sale, exchange or transfer o f the right to d ispose
of goods as owner;
❑ Ease, hir e or other right granted in r elation to
goods, inc luding a supply of goods under a
finance lease; or
❑ Anything deemed to be a supply of goods.
Anything that is not a supply of goods or money is a supply of
services and includes:
❑ The grant, assignm ent, terminat ion or surrend er o f
a right;
❑ Making available facility, opportunity or advantage;
and
❑ Refraining from or toler ating an act ivity, a situation
or the doing of an act.
Tax able activity
This includes anything done or undertak en during the
commencement or t ermination of a t axable activity and is carried
on continuously or r egu larly wh ether or not for profit. It involv es
or is intended to invo lve the supply of goods and serv ices to
another person. It includ es a busin ess, trade, manufacture,
commerce or adventure in the nature of trade.
Tax able supply
Except st ated under the law, a taxab le supply is a supply of goods
and servic es m ade by a taxab le person for a consid eration, in the
course of h is business activities and includ es but is not limit ed to
the following:
❑ Processing of data or supply of informat ion or
similar service;
❑ Supply of staff;
❑ Acceptance of a wager or stak e in any form of
betting, gaming including lott eries and gam ing
machines;
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Transaction taxes
❑ Making of gifts or loans of goods;
❑ Leasing or getting goods on hire;
❑ Appropriation of goods for personal use;
❑ Sale, transfer, assignm ent or lic ensin g o f
patents, copyrights, tradem arks, computer
software and other proprietary information;
❑ Supply of power, heat, r efr igeration and
ventilation; and
❑ Supply of mining and drilling services.
I m position o f GST
GST is imposed on:
(a) A taxable supply; and
(b) A taxable import.
The amount of GST chargeable on a taxab le supply or import is
calculated by applying th e rate to the GST exclusive v alu e of
the taxable supply or import.
The rate of GST applicable on taxable supply or import is:
1. If the supply or import is zero-rated - 0%; and
2. If the supply or import is standard -15%.
The GST chargeable on a taxable supply is the liability of the
supplier and accounted for by the supplier to the tax
authorities, whilst the GST on imports is paid by the importer.
If a non-resident principal mak es a taxable supply or import
through a resid ent agent, the liability for GST lies with the
agent. Howev er, if such supply is m ade by a principal, that is
treated as resid ent and r egist ered for GST, the liability lies w ith
the principal resident under the GST Act and is defined as:
a) Government entity or a local council;
b) Person r esid ent in Sierra Leon e for the year in
question, for the purposes of the Income Tax
Act 2000;
c) A per son, other than an indiv idual, wh ich is
formed or created under an enactment or is
managed and controlled in Sierra Leon e
(whether or not that per son is r esident in
Sierra Leon e for the y ear in question for th e
purposes of the Income Tax Act 2000); and
d) Any other person to the extent that th e
person carries on a taxable activ ity in Sierr a
Leone.
R egistration
A person is required to register for GST if:
1. The per son’s turnover in a period o f 12 or
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lesser months exceeds Le350 million;
2. The per son’s turnover exceeds one-th ird o f
the thresho ld (Le350 million in a p eriod of 4
months ending on that day; and
3. There ar e r easonable grounds to expect that
the person will exceed the threshold (L e350
million) in the 12-month per iod commencin g
on the following day.
A r egister ed p erson for GST, who c eases to make taxab le
supplies for a six-month period and who does not intend to
make taxable supplies within a further consecutive 12-month
period shall apply for a cancellation of its registration.
An application in the prescrib ed form shall be mad e to the
Commissioner Gen eral w ithin 30 day s of the date on wh ich the
person is r equired to r egister. The Commission er General will,
within 21 days o f the applic ation for r egistration, confirm a
person’s r egistration with the issu e o f a GST registration
certificate and a tax identification number.
Tim e of supply
A supply of goods and serv ices is made on the ear lier of the
time when:
a) An invo ice for the supply is issu ed by th e
supplier;
b) Any consideration for the supply is received;
c) For a supply of goods; the goods ar e
deliv er ed or made av ailable for co llection;
and
d) For a supply o f servic e, th e services ar e
performed.
A supply of goods under a hir e purchase agreement or finance
lease occurs on the date the goods ar e m ade available under
the agreement or lease.
P lace o f supply
A supply of goods or serv ices is regarded as takin g place in
Sierra Leone if:
a) The supplier is a resident; or
b) The supplier is a non-resident and:
• In the case of a supply of goods, the goods
supplied ar e located in Sierr a Leone at the
time of the supply; or
• In the case o f a supply or serv ices, the
servic es are physically per formed in Sierr a
Leone by any person who is in Sierra Leon e at
the time the services are performed.
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Transaction taxes
Where goods that hav e been imported and are supplied to a
person before th e goods ar e entered for use w ithin Sierra
Leone, the supply is deemed to hav e tak en plac e outside Sierra
Leone.
Further, a rev erse charge of GST applies, wher e a non-resid ent
person supplies services to a taxable per son in Sierra Leone,
otherwise than through a resident agent, and the supply is not
taxable, but would hav e been taxab le if by a r esident, GST-
registered person.
GST Invoices (FA 2016)
Where ther e is improper use of GST invoic es, the Act imposes
a penalty of Le500,000 for any GST r egister ed person that
issu es a GST invoice that is not printed by the Nat ional
Revenue Authority or produced based on authorization from
the Commissioner General.

St amp and transfer duty

Stamp duties are levied on a w ide range of instruments and
documents at the rate o f 0.1% of the value o f the transaction.
These include agreements, bills o f exchange and promissory
notes, bills of lading, bonds, leases and power o f attorney
letters.

D o uble tax treaties and r educed rates

Country Dividends Interest Royalties

Qualifying companies (%) (%) (%)
Norway # 0 0
South Africa # # #
United Kingdom # 0

# Th ere is no reduction under the treaty, the domestic

withholding tax rate applies.

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Investment Information and Exchange
Control
I n vestment rules Tr ade and bilateral agreements
Member ship – W TO, ACP-EU Partn ership Agr eem ent,
The Investm ent Promotions Act was instituted to promote and
ECOWAS.
attract private investment, both domestic and for eign, for the
Bilat eral investm ent treat ies concluded with USA, Germany
development of value adding opportunities, export creation
and UK and is a signatory to the 1965 ICSID.
and employment opportunities.

Investments in arms and ammunition, m ilitary, polic e and

prison offic ers’ apparel and accoutrement ar e r estrict ed.
Therefore special approvals ar e r equir ed in ord er to inv est in
these areas.

I n vestment incentives

Incentives granted under the Investment Promotions Act

include:
❑
❑ Expatriate per sonnel w ith work perm its ar e
permitted to m ake rem ittances abroad
through a commercial bank;
❑ Profits and capital can be r epatriated w ithout
any restrictions; and
❑ Guarantees against expropriation of domest ic
or foreign private investments.
❑ An export lic ense is not requir ed for loc ally
produced goods except for precious miner als
and other materials as may be pr escrib ed Cu rrency of Sierra Leone - Bank of Sierra Leone Act 2019
from time to time;
❑ The personal effects o f an expatriat e work er
The currency of Sierra Leone shall continue to be the Leone.
issu ed with a work permit and his imm ediat e
family is exempted from customs duty; and The Leone shall be the currency for all accounting, financial
❑ Losses are carr ied forward for a period of t en reporting and official purposes in Sierra Leone and it shall be
(10) years. issued in banknotes and coins and prefixed by the sign "L e".
Prices for all transactions in Sierra Leone shall be indicated in
Ex c hange control
Leones. Except as otherwise provided in this Act, any person or
In order to improve transpar ency and effic iency in for eign institution who contravenes any provision of this Act or
exchange tran sactions and achiev e a mark et-det ermined Statutory Instruments made under this Act commits an
foreign exchange rat e, the Bank o f Sierra Leone (BSL) initiat es offence.
week ly auctions o f non-cash foreign exchange. While the
auction is primarily d esigned as a m echanism for the BSL to
efficiently inject foreign exchange into the m arket, it also
envisages a w indow for the sale o f foreign exchange by other
economic agents at market rates.

R esidence and work permits

All for eign citizens are requir ed to obtain work p ermits on
application to th e Ministry of Labour which will generally be
granted if it can be demonstrated that no local person is ab le
to do the job, however, all applicants should present valid
residential permits.

An n ual budget announcement

The Min ister of Finance generally announces the annual
Budget and Taxat ion Proposals in November each year for the
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Economic statistics
Economic statistics

Var iable D ec ember 2019

Prime Interest Rate 17.92
Exchange rate Le/US$) 9711
Inflation (end Period) 13.89
Inflation (Annual Av) 14.81
Nominal GDP (Le. Bn) - Projection 38,015
Nominal GDP (exc.Iron Ore(LeBn) - Projection 37,574

Travel information

Visa Requirements A visa is required to travel to Sierra Leone

from any country outside West Africa

Flights London and West African Neighbours

Inoculations Yellow Fever

C u rrency
The Leone (Le) which is equal to 100 cents.

L an guages
The official language is English, although a number of local
languages, such as Krio, are also spoken.

Official holidays
❑ New Year's Day - 1 January
❑ Maoulid-Un-Nabi - The Prophet’s Birthday* - Movable
❑ Armed Forces Day - 18 February
❑ International Women’s Day - 8 March
❑ Good Friday - Movable
❑ Easter Monday - Movable
❑ Independence Day - 27 April
❑ Eid-Ul-Fitr - End of Ramadan* - Movable
❑ Eid el-Adha - Feast of the Sacrifice* - Movable
❑ Christmas Day - 25 December
❑ Boxing Day - 26 December

*To be confirmed depending on appearance of the moon

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 For enquiries on further/additional Baker Tilly SL Services
please contact:

Derrick Kawaley - Managing Partner

T: +232 76 648987
E: dlkawaley@bakertilly.sl

Isiaka Balogun – Tax Partner

T: +232 79 462251
E: iabalogun@bakertilly.sl
Clifford Marcus-Roberts – Senior Manager
T: +232 76612961
E: crmarcusroberts@bakertilly.sl

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